Winter is coming, where will lamb land?

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While many are focussed on the Anzac Day market of a good autumn break, and whether more rain - or any rain at all for some - is on the horizon to kick start the season, the shortening days also tell us winter is right around the corner. Which usually means improved returns for those with held-over or out-of-season lambs in the paddock. However last year didn’t follow the usual trend, with prices falling pretty consistently from April through to December. So, what is 2024 likely to bring?

There is historically a supply-driven price trend for trade lambs in the lead-up to winter. The 10-year-average band rises slightly from now through to late July, as numbers get tighter and the last of the previous year’s lambs come through the system. There it peaks before falling away when the spring flush of new season lambs hit the market, ramping up supply. 2023 was the anomaly here, but the four years prior roughly follow this pattern. We can see from Figure 1 that while at a lower price point than in recent years, the 2024 trend is in line with the 10-year movement, having peaked in early summer and now again on the rise.

 

If we look at actual figures for winter, the five-year average shows trade lamb prices rising about 50¢/kg between now and the start of June and staying close to that level until the end of July. The 10-year average lifts a similar amount, however peaks at the end of June before beginning to drift lower. This could partly be attributed to the five-year trend reflecting a period of lower flock numbers and tighter supply, while across the 10-years it includes periods of higher numbers, with Meat and Livestock Australia weekly lamb slaughter averages being 15,000 head higher across the 10-years than five.

 

Last year, eastern states’ trade lamb prices fell 22% from now until the end of June and continued in that direction until November. In 2022, they held firm from now through until the end of July, before dipping slightly but rebounding nearly back at the start of spring. But if we look back at slaughter correlations, we see lamb slaughter is averaging 398,676 head so far this year – well and truly in record territory.

 

Excluding last year, we have to go back to 2017 when it was last above 350,000, and 2014 when it was above 360,000 head. In 2014, prices only lifted 15¢/kg between now and the beginning of winter and peaked in the first week of June. They held firm for a month before beginning to dip. The pattern was similar in 2017, however we can see prices held firmer through the spring. 

What does it mean?

While always weather dependent, we should see a slight strengthening – or at least a firming, of trade lamb prices through to the start of winter. That said, the ESTLI price fell 15¢/kg last week alone which accounts for the total potential rise through to the start of winter we saw in other high-slaughter years.

While we use those for reference, we can see from Figure 2 that current slaughter is on a high trend all of its own. If the kill continues in this manner the winter uptick will be limited, the silver lining being that if we continue on the 10-year average trajectory then the downside in spring will also reflect this and keep prices from a dramatic fall.

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Key Points

  • Current ESTLI movements are in line with the 10-year average.
  • Lamb slaughter remains in record territory, averaging over 390,000 head weekly.
  • Potential winter price hike likely limited by supply.

Click on figure to expand

Click on figure to expand

Data sources: MLA, Mecardo

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